This 3.7% Dividend Stock Might Be One of the Hardest-Working Picks in a 2026 TFSA

The Tax-Free Savings Plan (TFSA) is ideal to invest in high-yield and high-growth stocks. While there are many dividend stocks with a 9% and 10% yield, they carry equally high risk of a dividend cut. Meanwhile, this one dividend stock is working pretty hard to keep your TFSA returns attractive in 2026. Do not get fooled by the 3.7% yield, as this stock has more to offer than the yield.

One of the hardest-working picks in a 2026 TFSA

Manulife Financial (TSX:MFC) stock surged 14.5% from its March dip. The company announced 10% dividend growth for 2026, marking its twelfth double-digit dividend growth rise in 13 years. Manulife Financial’s core business is insurance, and its stock tends to rise when risks increase.

However, after the 2008 Financial Crisis saw the collapse of some of the biggest insurers, Manulife geared toward diversifying its revenue streams. It has expanded its portfolio to include wealth management services. The insurer is also expanding geographically and has partnered with Mahindra & Mahindra to enter the Indian markets. Growing exposure to Asia and global markets helped it offset the earnings dip in the United States.

Manulife has set new financial targets for 2027. Increase its core return on equity (ROE) to over 18% from 16.5% in 2025. Increase the Asia region’s core earnings contribution to 50% from 47% in 2025. All these expansion efforts show the hard work Manulife is putting in to avoid overreliance on insurance and one country. Nevertheless, it is vulnerable to a global economic crisis, which could increase claims.

Should you invest in this 3.7% dividend stock in 2026?

Manulife Financial has shown strong resilience over the last 12 years, consistently growing dividends even in the pandemic. It shows that product diversification has reduced the downside risk. The stock trades at a higher valuation of 11.6 times forward price-to-earnings ratio. Still, it is a buy for its dividend growth.

Manulife Financial’s 2025 dividend payout ratio of 42% is within its target range of 35–45% despite the 10% growth in dividends. This shows that the company can sustain its dividend growth. A good strategy for investing in this stock would be to buy a small quantity every month. Instead of investing $3,000 today, you can spread the investment over 10 months, investing a little over $300 every month. Or you could set a target to buy five shares of Manulife every month to take advantage of dollar cost averaging.

Compounding dividends

The major reason Manulife is a buy in a TFSA is because of the dividend reinvestment plan (DRIP). Most high dividend growth stocks do not offer DRIP or have suspended the plan. However, with Manulife, you can not only grow dividends by 10% but also use them to buy Manulife DRIP shares, which will also pay dividends.

A $3,000 investment in Manulife today will buy 56 shares, which will pay a $108.60 dividend in 2026. Assuming Manulife continues to grow dividends by 10% and its stock price also grows by 10%, you will earn eight DRIP shares in five years. Your dividend income will grow to $181.74.

If you keep accumulating 50 shares every year for the next five years, your DRIP share count could grow to 18, and your total shares could increase to 274. They could earn around $779 in annual dividends.

However, avoid investing a large portion of your TFSA portfolio in one dividend stock. It could increase company-specific risk.